MARKET REPORT: Shine comes off Petra Diamonds shares as it is rattled by lower diamond prices
The shine came off Petra Diamonds shares as it was rattled by lower diamond prices.
Revenue at the small-cap mining group, which digs for diamonds in South Africa and Tanzania, fell to £149m in the six months to December 31, down from £159m the year before.
Although it managed to narrow its first-half loss from £15.9m to £10.1m, it was far from smooth sailing. Petra said production got off to a ‘slower start’ than expected at its world-famous Cullinan mine in South Africa, which is the origin of the namesake diamond in the Crown Jewels.
Many mining groups in South Africa have been rocked by frequent power cuts, and Petra said this remains a risk.
But the main albatross around its neck for some time has been tumbling diamond prices.
This has been driven by a toxic cocktail of too much supply, trade tensions, sales of lab-grown diamonds and Chinese consumers reining in their spending on luxury goods. Petra’s shares plunged by 16.9 per cent, or 1.42p, to 6.95p, after it warned it has had to change one of its financial targets because the outbreak of coronavirus in China means the company expects diamond prices to take even longer to recover.
The epidemic, starting around the Lunar New Year holiday, meant diamond sales took yet another knock. Petra has told investors to brace for the amount of cash flowing in and out of the business to fall from a target of £115m-£154m to £77m-£115m by 2022.
It was also a bad start for the week for embattled oil and gas explorer Tullow Oil.
The energy group saw its stock fall again after it abandoned a well in Peru – in which it owns a 35 per cent stake – after failing to find oil there. It is the latest disappointment for Tullow, whose stock has nosedived by some 80 per cent in the last year amid setbacks to a huge oil find off the coast of Guyana and other issues at some of its African operations. Shares fell 2.7 per cent, or 1.22p, at 44.02p.
Back on British shores, Yorkshire fertiliser Sirius Minerals was also stepping deeper into the red.
Its shares fell 4.7 per cent, or 0.25p, to 5.03p – below a takeover offer price of 5.5p per share offered by FTSE 100-listed Anglo American in an all-cash rescue deal.
Sirius told investors on Friday that talks with an unnamed consortium had fallen through and that the only option is to back the Anglo bid in a vote next month.
Speaking of Anglo, its shares rose 0.5 per cent, or 10p, to 2103.5p after it reported bumper results in its platinum division and the departure of the unit’s long-running boss Chris Griffiths. The FTSE 100 rose 0.3 per cent, or 24.12 points, to 7433.25 as nervous traders were soothed by the Chinese government’s latest efforts to keep stock markets steady – this time by cutting interest rates on medium-term loans – in the wake of the coronavirus turmoil.
The FTSE 250 climbed 0.2 per cent, or 36.26 points, to 21826.34.
It was a mixed day for insurers, with Aviva rising 0.5 per cent, or 1.9p, to 412.8p despite saying that call volumes into its call centre were five times higher than normal on Sunday as Storm Dennis hit.
But Saga’s stock stalled 0.9 per cent, or 0.38p, to 44.2p after it agreed to sell its motorcycle insurance arm, Bennetts, to independent insurance broker Atlanta Investment Holdings in a £26m deal.
Over on AIM, investors had a better reaction to technology group Starcom’s motorcycle-related announcement.
The firm has inked an updated contract with US electric motorbike manufacturer Zero Motorbikes to further develop its Helios tracking technology, which will be installed in the vehicles. Shares rose 4.4 per cent, or 0.05p, to 1.18p.